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Friday 22.11.2019 | Name days: Aldis, Alfons, Aldris

Experts: no exceptions among possible privatizable state companies

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When considering different options to enhance the management of state-owned enterprises, including partial or full privatisation, there cannot be «holy cows» among the companies whose privatisation is not discussed, such opinion was expressed at the business portal organized debate where experts and business representatives had a discussion about state-owned companies future.

According to experts, when assessing the management quality of state enterprises, it should also be reviewed whether the public entities that are included in the list of non-privatisable enterprises, could improve their business activities and financial indicators by attracting private capital.

«As regards the privatisation of state-owned companies, I am of the opinion that there should not be «holy cows». Historically, this can be understood, because the privatisation process was carried out in a way that privatisation brokers could receive commissions or privatize the companies themselves. From the society’s point of view this is unacceptable. It would be better if we banned the privatisation so that the enterprises could not be stolen. However, we are growing and developing. And it might not be a sensible approach for a member country of the European Union (EU) in the long term,» stated the investment fund Prudentia partner Girts Rungainis (Ģirts Rungainis).

«If the state could generate more revenue by boosting the effectiveness, the country’s involvement would be good. Yet if there are infrastructure companies that determine the electricity prices, and if Latvia’s State Forests is stark profitable, it could mean that these companies are not competitive. Some of these enterprises might benefit if they are private undertakings and quote on the stock market. For instance, if 25%-30 % of Latvenergo participated in the stock exchange by issuing new shares and by attracting capital from investment projects, it would be very good,» said Rungainis. Prudentia is one of the expert companies that have participated in the government ordered review drafting on the Latvian state-owned assets in 2009.

In addition, the Acting Chairman of Latvenergo Board Uldis Bariss did not refrain from talking about the possibilities to quote the power supply utility on a stock exchange, even if the company is included in the non-privatisable undertakings list.

«It does not concern Latvenergo whether the shares are owned by the state or another entity. In the case of 25% stock quotations, the question is about more distant future, when significant investments will be required. At the present moment, we invest with borrowed means; however, there is a certain limit of how much it is possible to do so. After that there is a choice: to reduce the enterprise investment to the level that can be afforded from the cash flow, or to create opportunities for the company to accumulate additional capital. That would be a very plausible option to issue additional shares in the stock exchange,» indicated Bariss, when referring to what has been said by the Head of Latvenergo at that time Karlis Mikelsons (Kārlis Miķelsons) in late 2008 on the possible company’s quotation on the stock exchange.

The airline airBaltic President Bertolt Flick, whose transactions with the company’s shares and the brand have created heated discussions in the society, uttered that «there is no doubt that Latvenergo should be privatised as soon as possible, because the electricity market in Latvia is becoming a major obstacle for progress. The energy independency and the electricity price is one of the most significant factors for the further state growth».

An independent expert in energy matters Juris Ozolins (Juris Ozoliņš) even claimed that he would more willingly buy Latvenergo shares if this option is possible in the following years. «It would be very useful to have private equity participation in Latvenergo shares, which are competing in the energy production. Seeing that there is a system operator or transmission utility in Latvia, which is a controlled infrastructure enterprise with 7% capital return, I would invest in it my own  money, and be very satisfied. But I would not do that considering the company’s current state,» affirmed Ozolins.

The Ministry of Economics (ME) State Secretary Juris Puce (Juris Pūce), who led the working group that prepared the report on the state and local government-owned enterprises, said that the list of non-privatisable companies is a subject of future discussions. «Large assets – Latvenergo, Latvijas Dzelzceļš, Latvia’s State Forests – should be evaluated by how much return in the long term they give the country both directly and indirectly,» told Puce.

However, when expressing his personal opinion, the State Secretary said that, most likely, the companies that seem unnecessary to be under the state or local government ownership have to be privatised. «Latvia owns a very large number of companies with vague strategic importance and negative added value. The state has to get rid of them, especially considering the companies owned by the local governments, where the situation is even more dramatic. Why should Riga Municipality own a pawnshop? There are even hotels that are owned by the local governments,» J. Puce pointed out.

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